The BLS' Employment Cost Index (ECI) showed total compensation costs increased at their slowest pace on record in the first quarter, rising only 0.3 percent. The sluggish headline growth was confirmed as the two components of the index, wages & salaries and benefits, increased modestly. Wage inflation is not a concern to the Fed at present.

Wages & Salaries

- The ECI, the broadest measure of labor costs, increased at its slowest pace on record in the first quarter. The year-over-year pace dropped a half of a percentage point to 2.1 percent.

- Wages & salaries, which comprise 70 percent of the index, rose a benign 0.3 percent as declining labor markets continue to have an impact. There was a pickup in the pace of growth in wages for government workers, however, rising 0.7 percent.

Benefits

- Benefit costs, which include paid vacations, retirement benefits, and health insurance, rose only 0.5 percent last quarter as firms keep finding ways to pass these costs onto employees.

- Today's report confirms that the economic recession is having an impact on total employee compensation. Weak overall demand in the economy coupled with slack in the labor market should keep total compensation costs low throughout 2009.